Proposed rental reforms in Queensland could potentially open a can of worms for both tenants and landlords, potentially endangering the overall housing market across the state, according to industry experts.

The Queensland government recently proposed a slew of changes to the state's tenancy laws, which include the abolishment of a landlord's right not to renew a tenancy agreement at the end of the deal’s term.

In essence, this would allow the tenant to remain in the property indefinitely, unless the landlord is able to establish a legal reason to end the agreement as prescribed by the law, said Real Estate Institute of Queensland (REIQ) Media and Communications Manager Nicole Madigan.

“This reform has been cleverly disguised by the government as the abolishment of 'without grounds terminations or evictions' – that description is inaccurate and misleading,” she said.

“Under current rental laws, landlords cannot end a fixed-term tenancy agreement before it ends unless a breach has occurred.”

Other proposed measures include abolishing the landlords' right to refuse pets, giving tenants the right to modify a rental property without the landlord's consent, and imposing standards on rental properties.

“If enacted, the law change would erode fundamental landlord rights and deter property investment across the state. The reforms' ripple effect would see renters struggling to find suitable housing under already tight conditions,” Madigan said, adding that the proposed changes were “reckless”.

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Investors could ditch QLD

In a separate analysis, Propertyology head of research Simon Pressley said the reforms could trigger a domino effect, which could start from the mass exodus of investors.

“With many existing owners of Queensland investment properties already disappointed by the poor financial performance of their assets, this new legislation will be the final straw for some landlords,” he said.

The decline in investor activity could impact Queensland's real estate business, resulting in a loss of employment opportunities for professions such as conveyancers, building and pest inspectors, and property managers.

“Queensland's construction sector, one of the state's largest employers, will also feel the brunt of this legislation, as to get a lot of projects out of the ground, developers generally rely on investors for pre-sale commitments,” he said.

Should the proposals push through, Pressley said rental supply will start to decline, leading to the lowest vacancy rates in the state's history.

In Pressley's estimates, if around 5% of landlords sell their properties, 38,000 dwellings could potentially be removed from the rental stock. This equates to 100,000 people without a roof over their heads.

“I'd hate to think what will happen to these people, as well as to our economy, if 10 to 20% of landlords say enough is enough and sell up,” he said.

Rents could rise

While the proposals appear to give tenants more rights and flexibility, Pressley said the eventual decline in dwelling stock could push rents up by $100 weekly or $5,000 annually over the next two years, particularly in areas such as Cairns, Townsville and Mackay.

“Even before these ridiculous rental reforms were announced, rents have already started to rise because of more demand than supply,” Pressley said.

Rents in some areas in the state are already skyrocketing. For instance, the average rent for a three-bedroom house has already risen by $3,000 in Mackay, $1,400 in Cairns, $830 in Townville, and $730 in Bundaberg over the last 12 months.

The overall economy of the state could also suffer as a result of the possible scenarios arising from the proposed changes, Pressley said.

“When one state imposes conditions that create a more difficult environment for investors to operate in, it's an easy decision for them to eliminate that state from their selection criteria,” he said.

With few interstate and local investors, the state could "miss out" on hundreds of millions of dollars in stamp duty and land tax revenue. 

“Where do you think funding for new infrastructure comes from? The biggest revenue source is stamp duty on property transaction,” he said.